Oman’s employment law framework for private-sector employers is governed by Royal Decree 53/2023, which replaced the previous Labour Law (Royal Decree 35/2003) and introduced updated rules on employment contracts, probationary periods, overtime calculation, termination procedures, and end-of-service gratuity. The Ministry of Labour enforces these rules through labour file audits, workplace inspections, and work permit quota controls. Non-compliance results in fines, permit suspensions, and restrictions on new hire approvals.
This guide covers all core obligations under Oman’s labour law for employers in the private sector: employment contract requirements, probation rules, working hours and overtime calculation, leave entitlements, dismissal and termination procedures, end-of-service gratuity, and compliance with the Ministry of Labour. For the company registration process that precedes hiring, see our guide to business setup in Oman.
Oman Labour Law 2025: Royal Decree 53/2023 Key Changes
Royal Decree 53/2023, effective from 2024, updated Oman’s Labour Law in several areas that directly affect employers in the private sector. Key changes introduced under the new law include:
- Revised termination and dismissal procedures with updated notice period requirements and compensation frameworks for both employer-initiated and employee-initiated contract endings
- Updated probation period rules clarifying maximum probation duration and employer rights during the trial period
- Expanded employee protections covering workplace safety obligations, non-discrimination provisions, and anti-harassment requirements
- Employment contract transfer rules governing how employee contracts are treated when a business changes ownership or undergoes restructuring
- Revised end-of-service gratuity calculation clarifying the entitlement formula and the treatment of partial service years.
Employers whose HR policies reference Royal Decree 35/2003 must update employment contract templates, termination letters, and gratuity calculation procedures to reflect the current law. The full text of the law is accessible through the Ministry of Labour, Oman’s official portal.
Employment Contracts in Oman
A written employment contract must govern all employment in Oman’s private sector. Verbal agreements are not enforceable under the Labour Law. The contract must be in Arabic or in Arabic and English, and must specify the following as a minimum:
- Full name, nationality, and ID or passport number of both employer and employee
- Job title and description of the role
- Basic salary and allowances, including housing, transport, and any other fixed components
- Contract duration: fixed-term or indefinite (open-ended)
- Working hours and working days per week
- Probation period duration, if applicable
- Notice period for contract termination by either party
The employment contract transfer law under Royal Decree 53/2023 protects employees when a business is acquired, merged, or transferred to new ownership. The new employer assumes the employee’s existing contract terms, and the employee’s service period is calculated continuously from the original start date for gratuity purposes. An employee cannot be compelled to accept different terms solely because of a change in business ownership.
Probation Period Rules in Oman
Under Oman’s labour law, the maximum probation period for a new employee in the private sector is three months from the date of commencement of employment. During the probation period:
- Either party may terminate the contract without notice and without compensation, provided the termination is not discriminatory.
- The probation period can be included in the calculation of total service for gratuity purposes if the employee continues to work after probation ends and the contract is confirmed.
- A probation period cannot be extended beyond three months, and an employee cannot be placed on probation more than once with the same employer.
- Probation clauses must be stated explicitly in the written employment contract to be enforceable.
Working Hours and Overtime Calculation in Oman
The standard working week for private sector employees in Oman is 48 hours, typically spread over six days at eight hours per day. During Ramadan, working hours for Muslim employees are reduced to 36 hours per week. Working hours may not exceed 12 hours in any single day, including overtime.
Overtime Calculation Formula
Overtime in Oman is calculated based on the employee’s basic salary, not total salary. The applicable rates under the Labour Law are:
| Overtime Type | Rate | Formula (per hour) |
| Daytime overtime (weekdays) | 125% of regular hourly rate | (Basic salary / 208) x 1.25 |
| Nighttime overtime (after 8pm) | 150% of regular hourly rate | (Basic salary / 208) x 1.50 |
| Friday or rest day work | 150% of regular hourly rate | (Basic salary / 208) x 1.50 |
| Public holiday work | 150% + holiday entitlement kept | (Basic salary / 208) x 1.50 |
The divisor of 208 represents the standard monthly working hours (48 hours per week x 52 weeks / 12 months). Overtime hours must be recorded in the employee’s attendance file and compensated no later than the following month’s payroll.
Employee Leave Entitlements Under Oman Labour Law
| Leave Type | Entitlement |
| Annual leave | 30 days paid leave per year after completing one year of service |
| Sick leave | 10 weeks total: first 2 weeks full pay, next 4 weeks 75%, remaining 4 weeks 50% |
| Maternity leave | 98 days paid maternity leave (updated under Royal Decree 53/2023) |
| Paternity leave | 7 days paid leave for male employees on the birth of a child |
| Hajj leave | 15 days unpaid leave once during employment for Muslim employees |
| Study leave | Available for employees pursuing approved qualifications; conditions apply |
Annual leave accrues from the first day of employment. Unused annual leave may be carried forward with employer approval or compensated in cash upon termination. Sick leave beyond the entitlement period is treated as unpaid leave, and employment cannot be terminated solely on the grounds of illness during the sick leave entitlement period.
Dismissal and Termination of Contract in Oman
Oman labour law permits three types of contract termination by an employer: termination with cause, termination without cause, and redundancy. Incorrect termination procedure is the most common source of labour disputes and Ministry of Labour complaints, and the consequences include compensation orders and fines.
Termination With Cause (Disciplinary Dismissal)
An employer may dismiss an employee without notice or compensation only in specific circumstances defined in the Labour Law. Lawful grounds for summary dismissal include:
- Gross misconduct or conduct that causes material harm to the employer or a third party
- Repeated or wilful failure to comply with written warnings after formal notice
- Absence without authorization for more than ten consecutive days or fifteen non-consecutive days within a calendar year
- Impersonation or submission of false documents during hiring or in the course of employment
- Conviction of a criminal offence that carries a custodial sentence
Disciplinary dismissal must be preceded by a written investigation and a formal opportunity for the employee to respond to the allegation. Dismissal without following this procedure, even for a valid reason, may be ruled unlawful by the Labour Court.
Termination Without Cause and Notice Periods
An employer may terminate an indefinite contract without cause by providing the required notice period. Under the Labour Law, the minimum notice period is one month for employees with less than 3 years of service and 2 months for employees with 3 or more years of service. Fixed-term contracts cannot be terminated early by the employer without cause unless the contract contains an early termination clause, and doing so without cause entitles the employee to compensation for the remaining contract period.
Resignation notice periods for employees follow the same structure: 1 month’s notice for under 3 years of service and 2 months’ notice for 3 years or more. An employee who resigns without serving the notice period may have their final settlement reduced by the equivalent of the notice period’s salary.
End of Service Gratuity Calculation in Oman
Every employee who completes at least one year of continuous service with a private sector employer in Oman is entitled to end of service gratuity on leaving. The gratuity is calculated on the employee’s last drawn basic salary only, not total salary, and applies regardless of whether the departure is by resignation or employer-initiated termination.
| Service Period | Gratuity Entitlement |
| Less than 1 year | No gratuity entitlement |
| 1 year to 3 years | 15 days basic salary per year of service |
| More than 3 years | 1 month basic salary per year of service |
| Partial year (after 1 year) | Prorated for completed months |
Gratuity is capped at 24 months of basic salary under the Labour Law. The gratuity calculation uses the basic salary at the time of departure, not the salary at the time of hire. Gratuity must be paid within seven days of the employment contract ending.
Ministry of Labour Compliance and Workplace Inspections
Private sector employers in Oman are subject to compliance monitoring by the Ministry of Labour through labour file inspections, electronic system audits on the Invest Easy portal, and physical workplace visits. Key compliance obligations include:
- Labour file registration: All companies must register a labour file with the Ministry of Labour before hiring any employee. The file records all employment contracts, work permits, Omanisation quota status, and salary payments.
- Work permit processing: Foreign employees require valid work permits issued through the Ministry of Labour. Permit approvals are linked to the company’s Omanisation compliance ratio. Companies below the sector quota face suspension of new permit approvals
- Wage Protection System (WPS): Private-sector employers must pay salaries through the WPS, which electronically records salary payments. Late or non-payment triggers penalties and potential license suspension
- Omanisation quota compliance: Sector-specific Omanisation ratios must be maintained. Quarterly reporting to the Ministry of Labour is required for companies with a specified number of employees.
- Workplace safety: Employers must maintain safe working conditions and report workplace accidents to the Ministry of Labour within specified timeframes
Workplace inspections can be announced or unannounced. Common violations that trigger fines include employing workers without valid work permits, failing to maintain attendance records, failing to pay overtime, and employing workers in activities outside the permit’s scope. For investor visa and work permit processing, see our guide to the investor visa in Oman.
Conclusion
Oman’s Labour Law, under Royal Decree 53/2023, sets clear obligations for private-sector employers regarding contracts, probation, overtime, leave, termination, gratuity, and compliance with the Ministry of Labour. The most common and costly employer errors are incorrect termination procedures, miscalculated overtime, unpaid or underpaid gratuity, and non-compliance with Omanisation requirements. Getting these right from the start of operations protects the business from labour court orders, permit suspensions, and financial penalties.
MakeMyCompany assists businesses with every stage of employment compliance in Oman, from company registration and labour file setup to work permit applications, employment contract drafting, and ongoing Ministry of Labour compliance. Contact our team at omanbusinesssetup.com for expert support on business setup and employment law compliance in Oman.
Frequently Asked Questions
What is the current Oman labour law for employers?
The current law governing private sector employment in Oman is Royal Decree 53/2023, which replaced Royal Decree 35/2003. It covers employment contracts, probationary periods, working hours, overtime, leave entitlements, termination procedures, and end-of-service gratuity for all private-sector employees.
How is overtime calculated in Oman?
Overtime is calculated by dividing the employee’s basic salary by 208 (monthly working hours). Daytime overtime is paid at 125% of the regular hourly rate. Nighttime overtime (after 8 pm), Friday work, and public holiday work are paid at 150% of the regular rate. Overtime cannot exceed 12 total working hours per day.
What is the probation period under the Oman labour law?
The maximum probation period under Oman’s Labour Law is three months. During probation, either party may terminate the contract without notice or compensation. Probation cannot be extended beyond 3 months and cannot be applied more than once to the same employee by the same employer.
What are the lawful grounds for dismissal in Oman?
An employer may dismiss an employee without notice or compensation for gross misconduct, repeated wilful failure after written warnings, unauthorized absence exceeding ten consecutive days or fifteen non-consecutive days per year, submission of false documents, or conviction of a criminal offence. All disciplinary dismissals must follow a written investigation procedure before the dismissal is issued.
How is end of service gratuity calculated in Oman?
Gratuity is calculated on the employee’s last basic salary. Employees with one to three years of service receive 15 days of basic salary per year. Employees with more than 3 years of service receive 1 month of basic salary per year. Partial years after the first year are prorated. The total gratuity is capped at 24 months of basic salary.
What is the notice period for termination in Oman?
The minimum notice period for terminating an indefinite employment contract in Oman is 1 month for employees with less than 3 years of service and 2 months for employees with 3 or more years of service. The same notice periods apply to employee resignations. Fixed-term contracts require early termination clauses to allow termination before the contract’s end date.
What are the Omanisation requirements for private sector employers?
Private sector companies must employ a minimum percentage of Omani nationals, set by sector, and this is monitored through quarterly Ministry of Labour reporting. Sector quotas range from around 15% for technology and hospitality to 90% for banking. Non-compliance restricts new work permit approvals and can result in fines. For full details, see our guide to business setup in Oman.
What is the maternity leave entitlement in Oman?
Under Royal Decree 53/2023, female employees in the private sector are entitled to 98 days of paid maternity leave. Male employees are entitled to 7 days of paid paternity leave upon the birth of a child. Maternity leave cannot be counted as sick leave, and employment cannot be terminated during maternity leave.
About the Author
Shuja Ahmad is a Business Setup Consultant at MakeMyCompany, a business formation consultancy based in Muttrah, Muscat, Oman. He specialises in business setup in Oman for local and foreign investors, with hands-on experience in documentation and government submissions, including labour file registration, employment contract preparation, work permit processing, Ministry of Labour compliance, Omanisation reporting, and end-of-service gratuity calculations under Royal Decree 53/2023. Shuja assists private sector employers with every aspect of employment law compliance in Oman from the point of company formation through to ongoing HR and labour regulatory requirements. For expert guidance on business setup and employment compliance in Oman, visit omanbusinesssetup.com.
